The capital gearing ratio measures the proportion of debt compared to equity in a property development finance project’s capital structure in the UK. Calculated by dividing total debt by the developer’s equity, it shows how much of the project is funded through borrowed money versus the developer’s own investment. A higher ratio indicates greater financial leverage and risk, while a lower ratio suggests more conservative funding. This ratio is essential for both lenders and developers to evaluate funding stability, project risk, and the balance between potential returns and financial exposure in UK property development finance.
This sits beneath Leverage Ratios, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Peak Net Debt to GDV, as both are closely related measures used to assess similar aspects of performance or risk. In funding terms, Capital Gearing Ratio is most commonly encountered in connection with 1st Charge + Top-Up in Same Loan within the property development capital stack.
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